nu 508 – healthcare policy, finance & organization may 6, 2010 tracy hill tricia neis miriam...

MEDICAL DEBT

NU 508 – Healthcare Policy, Finance & Organization

May 6, 2010

Tracy Hill

Tricia Neis

Miriam Slaugh

Allison Veeder

PROBLEM IDENTIFICATION

Medical Debt: unpaid medical expenses owed to a health care provider, hospital, pharmacy, laboratory or medical supply company.

Medical Debt affects:uninsured, underinsured, insured, health

professionals, insurance companies, state and federal government

individuals, families and healthcare entities.

HISTORY1960’s Medicare & MedicaidConsolidated Omnibus Budget Reconciliation

Act of 1986Health Insurance Portability and Accountability

Act (1996)State Children’s Health Insurance Program

(SCHIP)

US has seen a substantial increase in aggregate health spending relative to income

Health Care costs account for 16% of nation’s GDP – an increase from 13.8% in 2000.

SOCIAL FACTORS Health Insurance tied to employment Medical condition affects ability to work→

lapse in health insurance→pre-existing condition→ no affordable insurance→leads to medical debt

29 million adults have medical debt (Zeldin & Rukavina, 2007). One in five citizens struggle with medical debt and adults with chronic illness skip medications

because of finances 47 million Americans were uninsured in 2005 ( Zeldin & Rukavina, 2007).

ECONOMIC ISSUES Insurance premiums ↑ 73% between 2000 and

2005, while wages ↑ 15%, inflation ↑ 14%.

(Seifert & Rukavina, 2006)Another study showed insurance premiums

increased 131% between 1999 and 2009, more than 3 times salary rate increase. (Cramer, 2010).

2/3 of US Adults under age 65 (116 million) have medical debt (Cramer, 2010)

Higher Premiums with increased out of pocket expenses

Many have turned to credit cards to pay for out of pocket medical expenses.

10% unemployment

ETHICAL ISSUES Individuals delay medical treatment due to fear

of medical debt

Affects access to care

In a recent survey (n =100),10% of underinsured Kansans reported they or a family member postponed surgery, office visit, lab work, and prescriptions due to cost.

(Britt, 2010)

LEGAL Hospital Emergency Dept required to care for

everyone. EMTALA More Bankruptcies:

In 2001, over 700,000 bankruptcies listed medical debt as a major contributing factor

(Columbo, 2007)Bankruptcies due to medical increased from

46% in 2001 to 62% in 2007 (Tamkins, 2009).1.5 million Americans filed bankruptcy in 2009

(Tamkins, 2009)

POLITICALHR 3421, The Medical Debt Relief Act

1.Requires medical debt that is fully paid off or settled to be removed from the individual’s credit record within 30 days.

2. Goal is to prevent individual credit scores to be compromised by medical debt

Expanding health care coverage for more individuals and families will prevent medical debt.

Eliminating pre-existing clause

ISSUE STATEMENTWhat actions can the government and the healthcare industry take to assist Americans in reducing their medical debt, thus ensuring a healthy population and a strong economy?

STAKEHOLDERSPatients At some point nearly all Americans will be a

patient in the healthcare industry. Barrier to access: Those who are uninsured

or underinsured and already have medical debt may become hesitant to seek further care which will increase their debt.

Patients with debt more likely to not fill a prescription or skip needed testing or follow up visits.

Delay of care leads to more complicated and expensive conditions.

STAKEHOLDERS Healthcare Providers

Overwhelming paperwork, insurance red tape and slow reimbursement making it difficult for independent providers to function.

Many patients who received care default on paying.

Providers are forced to pursue collection of debts by hiring expensive outside agencies

Patients who have delayed care present sicker.

STAKEHOLDERS Hospitals

When patients delay healthcare long enough, they often present to Emergency Department.

EMTALA prohibits refusal to treat patient due to ability to pay.

Emergency Departments provide very expensive care that may not be reimbursed.

Facing backlash for charging uninsured “list prices”, harassing patients for debt collection, and not providing enough charity care.

Some hospitals face revocation of property tax exemption due to these factors.

STAKEHOLDERS Additional Stakeholders

Financial institutionsCommunitiesGlobal economy

POLICY OBJECTIVES Goal is to help citizens recover from their current medical debt and prevent the incurrence of future debt by making changes to healthcare system.

MEDICAL DEBT Policy Objectives

Universal HealthcareImprove pricing policies and debt collection by hospitals.

Medical Debt Relief Act

POLICY OPTIONS/ALTERNATIVES

Do Nothing Option Incremental Change Option

Major Change Option

DO NOTHING OPTIONContinue with the current healthcare system that is inefficient and inaccessible to many of the population;

Deny some form of universal healthcare

Ignore the need to develop policies that assist people in reducing their medical debt.

INCREMENTAL CHANGE OPTION

Differentiate medical debt from consumer debt;

Limit the entry of medical providers into financial services by requiring hospitals and other medical providers to apply fair pricing and payment schedules for the uninsured and underinsured;

Enact a Borrower’s Security Act

MAJOR CHANGE OPTION

In addition to the incremental change option:

Enact the Medical Debt Relief Act Increase oversight of lines of credit

attached to health savings account products

Improve screening for eligibility in public or private financial assistance programs

Ensure adequacy of insurance coverage by providing universal healthcare.

EVALUATION CRITERIA

1.Likelihood of eliminating medical debt and implementing universal healthcare, by acknowledging that the healthcare system is inefficient and inaccessible for many.

2.Size and availability of funding options for reducing or eliminating medical debt.

3. Ability of current policies to meet current and future demand for medical debt relief to consumers.

4. Political feasibility of reducing and eliminating medical debt.

ANALYSIS OF DO NOTHING OPTION

Criteria 1:Pro- Maintain the status quo – nothing will change that isn’t already being addressed

Con- Increasing medical debt leads to continued use of credit cards to pay for medical bills and to some, even bankruptcy.


Criteria 2 - Pro:Contributing factors for the high costs of

medical care, include advances in technology, new devices, techniques, medications and research.

High cost of medical care for elderlyComplications r/t smoking/obesityMedical malpractice lawsuits and

cumbersome gov’t regulationsUnnecessary use of ED’s continues to

rise, leading to more “bad debt”.


Criteria 2 – Pro (con’t):Higher labor costs and healthcare worker

shortages only expected to grow.United States will continue the current quality of

medical care that is not accessible to everyone.Healthcare will continue to be funded by:

pharmaceutical and medical research companies individuals paying for health insurance premiums health insurance companies Medicare, Medicaid and State Children’s Health

Insurance Programs (SCHIP).


Criteria 2 – Con:High cost of healthcare

alarming social and economic problemsGreater number of underinsured and

uninsured; either ration or completely avoid the care

Medical debt use credit cards to pay for medical expenses

results in outstanding credit card balances potential to deplete personal assets.


Criteria 3 – Pro:Rational individuals would rather have

the best care available to increase their probability of a healthier, productive life, even if their decision is financially disruptive.

Current policy - Increased cost-sharing by consumers lessens health care costs provision of less expensive essential

insurance policies to make insurance more affordable.


Criteria 3 – Con:growing disparity between the care a person

expects to receive, what is affordable, and the care offered

Healthcare providers need to do a better job screening their patients for Medicaid and SCHIP. Clarify and publicize financial assistance

programs for those without resources to pay Many already forgo medical care because of

out of pocket expenses.


Criteria 4 – Pro:

Those that feel system works just fine :strong political voicesactively lobby politicians to

support their viewsPressure policy makers to

preserve the status quo


Criteria 4 - Con:

Current healthcare system does not work. Will continue to rely on national, state

and local gov’t to pay for and regulate expensive and burdensome policies

The need for policies relating to medical debt must not be ignored or overlooked.

ANALYSIS OF INCREMENTAL CHANGE OPTION

Criteria 1:Pro-

Medical debt paid by a credit card is lumped in with all consumer debt.

Not always properly identified as medical debt

Need to improve health care providers’ policies related to billing, collection, and screening for eligibility in public or private financial assistance programs.


Criteria 1-Pro- (con’t)Patients not informed about the

availability of financial assistance programs.Improve patient screening strategies

for eligibility for public programs such as Medicaid and Health Wave

Implement and publicize charity care programs that provide access to care for those without the resources to pay


Criteria 1: Con-

Individuals may not support a universal health care plan because of increased government oversight. They may feel that decisions to pursue or not pursue medical treatments will be determined by financial cost alone without regard to personal wants.


Criteria 2Pro-

Maintain and expand safety-net clinics.Maintain and expand public insurance

programs such as Medicaid and Health Wave

Implement a guaranteed loan program for medical procedures and treatments (models student loan programs)


Criteria 2 – Con-Discourage medical providers from

entering the financial services area Transforms the patient/provider

relationship into a debtor/creditor relationship


Criteria 3Pro-Medical credit cards

Still have high interest rates and fees, making it difficult for people to pay – end up paying more!

More regulating of the credit card industry is needed to protect consumers from medical credit card debt

Research is needed to determine if households devoting high percentages of income to medical expenses use credit cards for other basic necessities.


Criteria 3 Con-Downward spiral of economyRise in healthcare costsPremiums up 131% in last decadeBusinesses struggling = decreased

profits = cost to employee/consumerResponsibility of the individual to budget

for out of pocket expenses.


Criteria 4 – Pro- Individual making a good faith effort to pay

their medical bills shouldn’t have to pay >high interest rates > penalty fees

Government must step in and help protect consumers from deceptive credit card terms and exorbitant interest rates and fees.

National and state hospital associations need to take steps to increase the net yield to hospitals from the uninsured population More equitable pricing and better medical debt

repayment terms


Criteria 4-Con

Credit card companies are reluctant to separate medical debt from consumer debt time and labor issueseparating the two would be very

tedious and potentially confusingLumping all the debt together

potentially benefits the credit card companies

ANALYSIS OF MAJOR CHANGE OPTION Criteria 1

ProTwin problems of health care cost and

coverage must be addressedProtect American families from financial

insecurity and harmful health outcomes that sometimes result from current system

Ultimate solution will provide universal access to comprehensive benefits

ANALYSIS OF MAJOR CHANGE OPTION

Criteria 1Con-Difficult to fully analyze:

Impact of the medical debt relief act Impact of universal healthcare

Patients with access to care will increaseQuestion feasibility

Specialists fear reimbursement will reduce salaries

Insurance companies will use power to protect their turf by lobbying and influencing legislators to maintain the status quo


Criteria 2Pro

Ensuring health insurance coverage that provides policy holders access to care and protection from financial ruin can avoid and eliminate medical debt

Borrower’s Security Act can help people who have medical debt negotiate with insurance companies, hospitals, and other health care providers:fee reductionsaffordable payment plansmore equitable treatment

ANALYSIS OF MAJOR CHANGE OPTION Criteria 2-

Con-New health benefits + increased healthcare

needs = higher health care costsRate of cost increases will be unsustainable

over time =major policy changes:

raise costs increase the federal deficit

Not likely to be accepted by policy makers.


Pro-Borrower’s Security Act restores the

current practices and balance of power in lending institutions

Limitations on credit card companiesRaise the minimum payment

requirement to five percent of a cardholder’s balance to curtail excessive debt loads.


Criteria 3 Con-

Health savings accounts (HSAs), high deductible plans, and limited benefit policies:attribute to consumer-driven health care increase individual risk and challenge the notion of health insurance

Businesses often face double digit premium increases Pass along more of the cost of the coverage,Put the employee at risk of incurring significant

medical debt


Criteria 4: Pro Government should consider :

Policies that restrict the reporting of medical debt to credit agencies

Health Care Loan Program that parallels student loan program:Grant individuals access to capital for medical

procedures and preventative servicesCreate a financial incentive to seek careKeep the bad debt off of the health provider's balance

sheetReduce personal bankruptciesHelp spare homeowners from foreclosure and renters

from eviction


Con- More funding options mean more federal

government spending Increase in the already astronomical national

debt Current system for handling medical debt simply

does not work Change must occur Implementing a Borrower’s Security Act and

enacting the Medical Relief Act are ways medical debt policies can be successful.

COMPARISON OF POLICY ALTERNATIVES

Do Nothing Option Incremental change Option

Major Change option

criteriaLikelihood of eliminating medical debt

- + +

Options for reducing or eliminating medical debt

- + ++

Ability of current policies to meet current and future medical debt relief to consumers

- - -

Political Feasibility of reducing or eliminating medical debt

- - -

Score: 0 2 3

SUMMARY Summary/Recommended Policy Healthcare Reform must happen, to decrease the

amount of medical debt. Do nothing option: provides no alteration in the

current system, sit and wait. Medical debt will continue to accumulate at a rapid rate.

Incremental change option: change in how medical debt is looked at by creditors. The change would allow medical debt to be listed as medical debt and consumer debt as consumer debt. A decrease in percentage rate for medical debt. Once the debt is paid in full the incident is wiped from credit report.

SUMMARY Major change policy: Policymakers must address

the twin problems of health care cost and coverage in a comprehensive manner to protect American families from financial insecurity and the harmful health outcomes that result from the current system. The ultimate solution is a system that provides universal access to comprehensive benefits.

By ensuring health insurance coverage provides policy holders access to care and protection from financial ruin, medical debt can be avoided and eliminated.

Decrease interest rates by credit card companies.

SUMMARY Change has to occur and it is up to us to make

that change. Encourage your representatives to seek health care reform.

As health care providers we should voice our thoughts and recommendations to legislation, we deal with this issue on a daily basis and therefore will have an increase in knowledge on how it could improve.

Compromise by all parties involved (Democratic, Republican, Conservative) will need to occur to do what is need to meet Americans needs for insurance a decrease in medical debt.

REFERENCES Anonymous. (2008, August 21) Report: large number of U.S. adults face medical bill

problems. Atlanta Business Chronicle, retrieved on April 17, 2010 from www.bizjournals.com/atlanta/stories/2008/08/18/daily68.html.

Britt, K. (2010, April 9). Inadequate insurance leading to many ills. Lawrence Journal World, retrieved on April 17, 2010 from

http://wellcommons.com/groups/nosurance/news/2010/apr/9/kansas-health-institute-s/ Collins, S., Doty, M., Kriss, J., & Rustgi, S. (2008). Seeing red: The growing Burden of medical bills and debt faced by U.S. families. The Commonwealth Fund. Retrieved

on April 23, 2010 from http://www.commonwealthfund.org/Content/Publications/Issue-Briefs/2008/Aug/.

Colombo, J. (2007). Federal and state exemption policy, medical debt and healthcare for the poor. St. Louis University Law Journal, 51, 1-25.

Cramer, R. (2010). The medical relief act. New America Foundations. Retrieved on April 18, 2010 from

http://assets.newamerica.net/blogposts/2010/financial_burden_of_healthcare_costs. Doty, M., Edwards, J., & Holmgren, A. (2005). Seeing red: Americans driven

into debt by medical bills. The Commonwealth Fund. Retrieved on April 23, 2010 from http://www.commonwealthfund.org/Content/Publications/Issue-

Briefs/2005/Aug/. Gruber, J. & Levy, H. (2009). The evolution of medical spending risk. Journal of Economic

Perspectives, 23, 25-48.

http://www.bizjournals.com/atlanta/stories/2008/08/18/daily68.html

http://wellcommons.com/groups/nosurance/news/2010/apr/9/kansas-health-institute-s/

http://www.commonwealthfund.org/Content/Publications/Issue-Briefs/2008/Aug/

http://assets.newamerica.net/blogposts/2010/financial_burden_of_healthcare_costs

REFERENCES Levitt, J. (2004, July). Transfer of financial risk and alternative financing solutions. Journal of Health

Care Finance, (30)4, 21-32. Retrieved May 3, 2010, from ProQuest Nursing & Allied Health Source.

Pryor, C. and Prottas, J. (2006). Playing by the rules but losing: How medical debt threatens Kansans’ healthcare access and financial security. Retrieved on May 2, 2010 from http://www.accessproject.org/adobe/kansas_playing_by_the_rules.pdf

Seifert, R. W. & Rukavina, M. (2006). Bankruptcy is the tip of medical-debt iceberg. Health

Affairs, 25, W89-W92.

Tamkins, T. (2009, June 5). Medical bills prompt more than 60 percent of US bankruptcies.

CNN, retrieved on March 17, 2010 from

http://www.cnn.com/2009/HEALTH/06/05bankruptcy.medical.bills/

Unland, J. (2005, October). Two Years into the storm over pricing to and collecting from the

uninsured- A hospital valuation expert examines the risk/return dynamics and asks: Would fair pricing and fair medical debt repayment plans increase yields to hospitals and simultaneously mitigate these controversies? Journal of Health Care Finance, 32(1), 54-66. Retrieved May 3, 2010, from ProQuest Nursing & Allied Health Source.

Zeldin,C. & Rukavina, M. (2007). Borrowing to stay healthy: how credit card debt is related to

medical expenses. Retrieved on April 17, 2010 from www.demos.org/pubs/healthy_web.pdf.

http://www.cnn.com/2009/HEALTH/06/05bankruptcy.medical.bills/

http://www.demos.org/pubs/healthy_web.pdf



nu 508 – healthcare policy, finance & organization may 6, 2010 tracy hill tricia neis miriam...

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